Idaho Federal Court Holds Insured Prohibited from Suing Title Insurance Company After Insured Lost State Court Action Against Title Agent

The United States District Court for the District of Idaho recently dismissed an action brought by an insured against a title insurance company, finding that the insured had unsuccessfully raised similar claims in a state court action with the title agent.  See Cummings v. Stewart Title Guar. Co., 2020 WL 6747977 (D. Idaho Nov. 17, 2020).  In the case, a non-party sold some of his property to plaintiff.  The title agent prepared a purchase contract and a title commitment, in which the legal description erroneously included land that the seller did not own, as well as land the seller owned but did not intend to sell.  The agent then prepared a deed that excluded the land the seller did not own, but included the land the seller did not intend to sell.  After discovering its mistake, the title agent re-recorded a deed with the correct legal description, but without plaintiff’s consent.  The title agent also issued a title insurance policy on defendant’s behalf, in which the legal description matched that of the re-recorded deed.  Plaintiff then brought an action against the seller and the title agent in state court, claiming that he was entitled to the property erroneously included in the first deed and alleging negligence against the title agent.  The trial court award plaintiff judgment against the agent only for negligence, but this decision was reversed by the Idaho Supreme Court.  See Cummings v. Stephens, 157 Idaho 348 (2014).  Plaintiff then brought this action against the defendant title insurance company alleging breach of contract and bad faith, and defendant moved for summary judgment.

The Court granted defendant’s motion.  First, it denied defendant’s argument that the action was barred by the Rooker-Feldman doctrine, which holds that federal district courts do not have jurisdiction to review final decisions of state courts or reverse or modify state court judgments.  The Court found that plaintiff’s action does not claim any error by the state court, but instead simply that defendant breached its contract with plaintiff and acted in bad faith.  Second, the Court nonetheless found that the doctrines of claim and issue preclusion barred the complaint, because the issues raised in this action were unsuccessfully litigated by plaintiff in the state court action.  “Each of these issues turns on whether [plaintiff] can establish that he was supposed to have received property east of the highway as part of his purchase of Stephens’ Ranch. Because this issue has already been fully litigated in state court, [plaintiff] cannot relitigate the issue here.”  Thus, because the state court action established that plaintiff was not entitled to this additional land, he could have no claim against the title insurance company here for breach of contract or bad faith regarding this land.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.